Management Lessons from the East

by

DR WILLIAM FUNG

Group Deputy Chairman of the Fung Group, Group Chairman of Li & Fung Limited and Chairman of Global Brands Group Holding Limited.

Dr. William Fung is the younger of the two brothers now helming Hong Kong’s Li & Fung, which designs, sources, develops and distributes consumer goods. HQ Asia speaks to him about the lessons he has learnt working and leading in this global Asian company. Although he is careful not to stereotype practices as East- and West-oriented, he shares some best practices at Li & Fung, and a number of personal lessons, which may have Eastern influence.

As alumni of Princeton University, MIT, and Harvard Business School, Dr William Fung and his brother Victor were schooled among the crème de la crème of business school scholars. Nevertheless, Fung shares that he did not hit the ground running when he returned from the US to work for his father at Li & Fung in 1972.

Early on, Fung attempted to remove a long-time employee of the group from his position. “My father told me that I was being too harsh and that this was not how things were done here. I needed to learn the meaning of ‘thinking of the source, whilst drinking from the stream’,” he said. The Chinese idiom is often used to describe expressing gratitude for people who have helped contribute to your past successes. Fung’s father pointed out that the employee in question had contributed greatly to the company’s growth and needed to be treated with more respect.

This was quite different from the objective, data-driven management methods in which Fung had been schooled. What worked for businesses and leaders in the US was effective precisely because they were leading in the US. Realising that he might need to tailor his leadership and management style to the Hong Kong and Asian context, Fung came to appreciate that he could not dogmatically insist there was only way to do things.

In a similar vein, Fung frowns at best practices that suggest organisations should get rid of their underperforming employees. Taking a long-term perspective, these people might be future star players, and should not be judged purely on short-term results.

“The way I treat my employees is mirrored back at me,” he said, adding that he hopes his employees will treat him as well as he believes he treats them.

In Asia, Work and Life Intertwines

Fung highlights how work is an integral part of life in Asia; unlike in the West, where work may be compartmentalized and insulated from personal life. “My Chinese friend was working for a Caucasian boss, and was informed that he would be laid off as the company was not doing well,” he remembered. “After spending some time discussing the aspects of the retrenchment, his superior concluded the conversation by saying, ‘No hard feelings, right? Do you want to play a game of golf tomorrow?’”

Fung explains that to the superior with a Western background, work and life are fairly separate. The abrupt end to a working relationship does not necessarily interfere with social relationships. However, to Asians, work and life are more intertwined, and harming a business relationship is likely to harm a personal one. Thus, having an understanding of these cultural differences is important for companies that work across borders.

Growth is Imperative and Non-negotiable

Fung shares that he frequently reminds his managers that the only way to help employees fulfil their dreams and potential is to ensure that the company keeps growing and expanding. “If the company does not grow, how do we promote people and give them bigger opportunities?” he noted.

The growth objective often translates to hiring talent with a view of the longer term. Fung says that his company does not hire people expecting them to immediately perform in a given role, but expects them to excel within a few years. This allows the group to hire for attitude rather than for skill set.

“Skills can be learned, but attitude is harder to form,” he explained.

“Since we are hiring people for a career, we do not necessarily need people to be able to do the job tomorrow. We instead want people who can lead the group to long-term success.”

Success Stems from Detailed Planning and Accountability

On a macro level, Fung argues that the Western best practices of quarterly reporting, fluid goals and rolling plans are probably not the most effective methods for keeping employees on track. “The goalposts are shifting so frequently no one takes them seriously,” he observed.

Drawing inspiration from an unconventional source, he suggests the Chinese Communist Party’s (CCP) greatest contribution to management might be its five year planning cycle. “We operate similar to the way they do: fixed, non-negotiable long-term plans,” he said. “Once the goals are set, you have to achieve it no matter what. No excuses.”

Unlike the CCP, Li & Fung has three-year plans. However, Fung points out that these plans were adhered to and achieved – even in unfavourable, unpredictable conditions like the 1997 financial tsunami that hit.

“Once our goals are set we leave people to do their work. We will not adjust these goals for three years,” Fung said. “It is then up to the manager to think out of the box and achieve these goals, even if something unforeseen happens.”

He added, “Similarly, our promotion and movement of talent happen every three years. If I’m moving someone to a third-world country, his family knows it will be for at least three years.”

Reinvent Before Change Happens

The global economy has of course evolved a great deal since Li & Fung was founded 108 years ago, and Fung recognises that the pace of change will continue to quicken. With Asia currently at the centre of economic momentum and change, it is unsurprising that the Fung brothers have given substantial thought to change and change management.

While the Li & Fung model of three-year plans might not appear to be compatible with effective change management, Fung says otherwise. Three-year cycles, he explains, give managers the necessary space and time to reflect and take stock. He said, “Every three years we have to ask, ‘If Li & Fung is not currently in this product market, would we enter it?’ If not, let’s pull out.” Fung argues that reflection is crucial to the group’s aim to constantly reinvent itself.

By design, the Li & Fung group also does not invest in and get saddled down with capital investments like factories and production lines. According to Fung, its role is to be the brain centre for countless supply chains around the world, as well as provide ideation, management and product design. This role also allows the group to be agile and pull out of product lines it does not deem lucrative.

Is Asia’s Best Yet to Come?

There is huge unrealised potential in Asian juggernauts such as China, says Fung. In recent years, Chinese companies such as Alibaba and Tencent have been making significant inroads into traditionally Western-dominated areas like e-commerce and mass media.

Fung argues this growth is all the more amazing when one bears in mind that the Chinese have achieved it with what was essentially a lost generation, deprived of access to education during the Cultural Revolution. He believes that the world essentially judges a leader’s competence by the way they communicate, and consequently Mandarin-speaking Chinese leaders do not get the recognition or exposure they deserve. “Imagine what it would be like if leaders spoke exceptional English,” he said. “If you listen to them speak Mandarin, these are truly inspirational leaders.”

He sees the return and reintegration of China’s first batches of Western-educated business school students as an intriguing prospect, as the melding and exchange of different philosophies and ideas is, in his opinion, an ideal environment for incubating talents. “The best thing about China and Asia is that this is the fastest-growing region in the world. Given the first generation of Chinese entrepreneurs is quite good, wait till the next generation of leaders and entrepreneurs rise up.”

This article was first published in HQ Asia (Print) Issue 08 (2014)Dr William Fung is the Group Deputy Chairman of the Fung Group, Group Chairman of Li & Fung Limited and Chairman of Global Brands Group Holding Limited.